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BofA's Lewis Takes Fire for Merrill Deal, But Bernanke Under Scrutiny Too

Posted Jun 11, 2009 03:37pm EDT by Aaron Task in Newsmakers, Banking
Related: BAC, ^GSPC, ^dji, SPY, DIA, XLF, FAS
Testifying before Congress, Bank of America CEO Ken Lewis was in the hot seat Thursday but he wasn't alone. Ben Bernanke also faced scrutiny for the Fed's role in Bank of America's controversial acquisition of Merrill Lynch.

Despite being asked directly by several members of the House Oversight Committee, Lewis declined to say overtly he went through with the deal because of pressure from Bernanke and then-Treasury Secretary Hank Paulson. "I would say they strongly advised and they spoke in strong terms, but I think it was with the best intentions," Lewis said.

Lewis was treated harshly for not being forthcoming on that point, and for not telling BofA shareholders about his concerns about Merrill's losses prior to their voting on the deal in early January. Most notably, Dennis Kucinich (D.-Ohio) accused Lewis of abandoning his fiduciary duties and trying to get the Fed to give him cover to keep BofA shareholders in the dark.

But Bernanke also came under criticism, notably from Darrell Issa (R.-Calif.), after emails about the chairman's role in the "negotiations" between the government and BofA came to light.

The very fact the House subpoenaed the Fed's emails is noteworthy, and are consistent with growing support for Ron Paul's bill (HR 1207) to audit the Fed.

The fact Bernanke and the Fed aren't being treated with the same reverence afforded Alan Greenspan is a sign of progress, or a least a lesson learned. But the risks to the Fed's independence have grown dramatically in the past 18 months and represents a very delicate issue, given concerns about their "exit strategy" from the current liquidity push.

 

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